Trafalgar was founded seven years ago by Australian trader Lee Robinson, a Cambridge mathematics graduate who used to work at Tudor Capital, and former Deutsche Bank executive Theo Phanos, who is a Cypriot.

They own most of the shares in the hedge fund, which according to its website has $2.8bn (£1.4bn) under management.

Trafalgar is one of London's best-known hedge funds and earned its reputation by investing in takeovers and company restructurings.

Petershill - which is run by banker Jonathan Sorrell, son of WPP boss Sir Martin Sorrell - is understood to have paid around $50m to $100m for a 20pc stake in Trafalgar.

Last year, Goldman Sachs set up Petershill, a $1bn private equity fund said to be backed by Gulf investors, to buy minority, non-controlling stakes in young hedge funds that are set to continue performing well.

These types of deals allow top-performing managers to cash out their own holdings and have a relationship with banks that can help them raise more cash to invest in their funds.

Since Petershill was set up, Mr Sorrell has wasted no time and set about buying up stakes in some of Britain's most successful hedge funds.

In July 2007, the fund bought a 10pc stake in Winton Capital, a $10bn Commodity Trading Adviser run by David Harding, a founder of the hedge fund AHL. This year, Mr Sorrell bought just under 20pc of £1.5bn fixed-income fund Capula.

Recently, it emerged that investment bank Lehman Brothers planned to copy Goldman Sachs' idea by launching a fund that initially will invest up to $1bn in buying stakes in hedge funds.

Goldman Sachs declined to comment. Trafalgar could not be reached for comment.